Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92631
Authors: 
Hirota, Shinichi
Kawamura, Kohei
Year of Publication: 
2005
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 635
Abstract: 
This paper proposes an implicit control mechanism of managers inside the firm. We argue that the need to motivate workers may make it beneficial for a self-interested, short-sighted manager to pursue long-run viability of the firm. When the firm is in a stable environment, this implicit control mechanism may not contradict shareholder value maximization. However, when the firm needs restructuring, this mechanism damages firm value. We discuss when external governance is desirable, and when it is not. Our model also offers economic explanations for some related issues in managerial behavior such as restructuring aversion, survival motive, and excessive risk aversion.
Subjects: 
corporate governance
worker incentives
autonomous management
restructuring
corporate survival
managerial risk aversion
JEL: 
G34
J41
Document Type: 
Working Paper

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